Italy has extended and broadened the scope of its special tax regime for newly resident workers (lavoratori impatriati) by increasing the amount of the tax exemption from 50% to 70% for the first five years after relocation and opening it to to any workers who did not live in the country in the last two years.
Until now, the tax exemption for Italy-sourced income was restricted to qualified professionals, managers, executives or high-prestige entrepreneurs. With the new rules, this regime is available to any workers who were non-resident during the two previous years, who commit to residing in Italy for at least two years and who perform their work mainly in Italy, irrespective of their qualifications or role.
The increase in the tax exemption from 50% to 70% for the first five years after relocation becomes even more attractive in a country where the progressive rates of income tax vary from 23% to 43%.
All the above amendments make the relocation of workers to Italy even more appealing than before"
According to global law firm Withers, from 2020, the new regime is open to an employee, a self-employed professional, or an entrepreneur who:
- becomes Italian tax resident (regardless of his/her foreign State residence);
- commits to remain an Italian tax resident for the following two years;
- has not been Italian tax resident in Italy for the last two years (the Regime also applies to Italian returnees); and
- mainly works within the Italian territory for either an Italian or a non-Italian enterprise, regardless of his/her role or qualification.
Individuals who meet these criteria are subject to Italian individual income tax only on 30% of their employment / self-employment / business income (individual income tax can be reduced to 13% approximately).
Said taxable income is further reduced to only 10% for those who transfer their residence to the southern regions of Italy (individual income tax can be reduced to 4.3% approximately).
The regime applies for 5 years and can be extended for another 5 years (in total 10 years) subject to some additional conditions (for instance, if a residential property is purchased or there is an underage child).
The income tax exemption is also increased to 90 per cent where the new resident worker relocates to one of southern Italy's ‘deprived' regions (Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, or Sicily).
New residents who are Italian citizens also now qualify for the special regime if they have been tax resident of a foreign country with a double taxation treaty for the prior two years, and if they have not removed their name from the official Italian resident population list.
"All the above amendments make the relocation of workers to Italy even more appealing than before", commented law firm Baker McKenzie.
One of the other advantages of the new rules is that it embraces employees and self-employed professionals regardless of their qualifications, meaning it could apply to sport stars (both players and coaches) relocating to Italy as employees of Italian clubs (as well as self-employed professionals).
"This would make Italian clubs (that typically negotiate salaries of sport stars net of Italian income taxation - such as soccer teams) more competitive at an international level to engage sport stars," Withers said.